Internet-Delivered Video Growth Continues to Drive Physical DVDs into Double-Digit Decline

Monday, December 13th, 2010
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Home video retail revenue has fallen precipitously over the past five years. Worse yet, double-digit declines in annual retail sales of physical discs are expected, resulting in a drop of $4.6 billion from 2009 to 2014. To replace retail DVD revenue losses, the online digital paid video download and streaming segment, (which includes both purchase and rental) is expected to show high revenue growth. Annual revenue is forecast to grow from $2.3 billion to $6.3 billion within five years, says In-Stat.

The battle lines for online offerings are continuing to be drawn and are intensely competitive. Online à la carte rental of TV episodes will directly compete with online subscription TV services, such as Hulu Plus and Netflix, and may detrimentally impact the use of TV Everywhere services. Further competition will come from paid online video stores, such as Apple iTunes, Amazon, Vudu and CinemaNow.

“Video disc rentals will continue their significant decline,” says Keith Nissen, Principal Analyst. “Netflix is already shifting its focus to online streaming, and Red Box is evaluating a similar strategy. The convenience and utility of the online offerings are simply too compelling. Online rentals permit the selection of any movie or TV program from the Video-on-Demand library. Ultimately, it will be impossible for physical disc kiosks to compete with the in-home or in-store download-to-rent business model.”

Some of the research findings include:

  • US TV download revenue will more than triple between 2010 and 2014.
  • Premium channels (HBO, Showtime, etc.) are in competition with online video subscription services for both subscriber spending, as well as movie licensing rights.
  • The emergence of electronic sell-through for online video purchases and rentals will transform the digital entertainment industry over the next five years.
  • Online VOD (Video-on-Demand) subscription revenue is expected to approach $3.5 billion by 2014.

Recent In-Stat research The Battle for OTT Video: Redistributing Video Industry Dollars (#IN1003966MBI) reviews the economics behind the video entertainment industry today, encompassing:

  • 2009 revenue and expense totals for each market segment including; theater box office, home video, pay-TV, premium TV channels, broadcast networks, online video, and video disc rentals. Segmentation of online video revenue includes electronic-sell-through (EST, download-to-own), VOD rentals, and subscriber VOD.
  • Three critical market scenarios are assessed from a revenue and profit standpoint: Apple’s 99-cent iTunes video rentals, online TV rentals as replacement of retail DVD/Blu-ray disc sales revenue, and the viability and impact on the pay business model.
  • Based on the research conclusions, five-year forecasts for each video entertainment market segment are presented.

For a free sample of the report and more information contact Elaine Potter,; (480) 483-4441